WASHINGTON (10/31/11)--The future of the U.S. mortgage market, and how to deal with the glut of foreclosures currently choking the housing market, were both taken on by members of Congress late last week.
Rep. Scott Garrett (R-N.J.) on Thursday introduced the Private Mortgage Market Investment Act. Garrett's legislation would require the Federal Housing Finance Agency (FHFA) to develop underwriting standards and securitization agreements and abolish the risk retention standards set forth by the Dodd-Frank Act. The legislation would also provide new disclosures for mortgage investors and securities purchasers.
The Obama administration is still considering a range of options for mortgage market reform, including almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. Administration officials have said that each of these proposals would shrink the government's role in the mortgage market.
A hearing on Garrett's bill has been scheduled for Nov. 3 in the House Financial Services subcommittee on capital markets and government sponsored enterprises.
Homes that have gone into foreclosure were also addressed last week, as 33 senators, including Jack Reed (D-R.I.) and Tim Johnson (D-S.D.), encouraged the Obama administration to speed up its research into how best to deal with real estate owned (REO) properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA).
The FHFA in recent weeks has sought outside opinion on how best to maximize value to taxpayers and increase private investment in the housing market while disposing of these properties. The U.S. Department of the Treasury and Department of Housing and Urban Development (HUD) are also participating in the initiative.
Among the approaches being considered are converting government-held homes into rental units or affordable housing. The senators in a joint letter called on administration officials to consider the most effective ways to stabilize neighborhoods and housing values as they develop ways to better deal with the government-owned vacant homes. The letter also seeks specific details on what suggested strategies seem the most promising, and what the next step will be for the FHFA and other agencies.
For more on Garrett's bill and the letter to the administration, use the resource links.